I agree, I wouldn't have paid them until the unit was demonstrated to work. You should have gotten legal advice back then rather than playing games.
You are wrong. The date on the check is without any real legal meaning. It can be cashed the minute you hand it to the other party. If you intentionally don't have funds, it's a crime. You need to make good on the check.
The property is the "proceeds" of a crime and indeed can be forfeited. You don't have to be charged or convicted for this to happen. This has to already have gone up before a judge to be valid however.
Frankly, you likely can stem the criminal and forfeiture actions by actually paying the check (and the NSF fees).
You can then think about suing the contractor for not finishing the job if he doesn't do so.

